Risk Analysis: Forever Green Renewables Limited (08203864)

1. Risk Rating: HIGH

Justification: The company exhibits a severe deterioration in financial position over the most recent reporting period, with net assets declining by 78% year-on-year. Critically, the company now carries negative working capital of (£53,745), meaning current liabilities exceed current assets. This creates material solvency risk if creditors demand payment or revenue stalls further. The dramatic shift in the balance sheet composition, coupled with a significant increase in related-party obligations, raises substantial concerns about ongoing financial stability.

2. Key Concerns

Concern 1: Severe Erosion of Shareholder Value

Net assets fell from £200,310 (2024) to £44,026 (2025) – a decline of £156,284. This represents a 78% reduction in the company's net worth in a single year. The P&L reserve (retained earnings) dropped from £200,302 to £44,018, indicating either substantial trading losses, exceptional write-offs, or significant dividend extractions. With share capital of only £8, the company's entire equity cushion is now extremely thin relative to total liabilities of £541,837 (current + non-current).

Concern 2: Negative Working Capital / Liquidity Strain

Current assets (£377,926) fall short of current liabilities (£431,671), resulting in negative working capital of (£53,745). This means the company cannot cover its short-term obligations from liquid assets even if all debtors paid immediately and all stock was sold. Trade creditors more than doubled from £45,575 to £103,983, potentially indicating the company is stretching payment terms to manage cash flow. Corporation tax of £53,649 remains outstanding, and finance lease obligations of £34,166 are due within one year.

Concern 3: Related-Party Obligations Surge

Amounts owed to associates increased from just £640 to £131,689 – a near-£131k increase. This represents the largest single creditor balance within current liabilities and suggests the company may be relying on loans from associated entities to fund operations. This concentration of debt to related parties creates dependency risk and raises questions about whether these obligations could be called in, potentially triggering insolvency.

3. Positive Indicators

Indicator 1: Cash Position Remains Positive

Despite the overall deterioration, the company retains £126,052 in cash (albeit down from £215,899). This provides some immediate liquidity buffer and suggests the company is not at a cash-crunch point today. The cash represents approximately 29% of total assets.

Indicator 2: Regulatory Compliance Is Current

Accounts are filed up to 30 September 2025, the confirmation statement is current, and no filings are overdue. The company appears to be meeting its statutory obligations, which reduces governance and compliance risk.

Indicator 3: Established Operating History

Incorporated in 2012, the company has traded for over 13 years. Historical data shows periods of stronger performance (net assets of £273,744 in 2023), suggesting the business model can be viable. The company also maintains tangible assets of £207,937 (primarily motor vehicles and plant/machinery) which could potentially be realised if needed.

4. Due Diligence Notes

Item 1: Profit & Loss Account Movement

The filed accounts utilise the small companies exemption and do not include a Profit & Loss Account. The £156,284 decline in retained earnings must be investigated – was this driven by trading losses, exceptional write-offs (possibly the reduction in trade debtors from £783k to £123k could include bad debt provisions), or dividend payments? Understanding the nature of this erosion is critical.

Item 2: Nature and Terms of Amounts Owed to Associates

The £131,689 owed to associates requires urgent clarification. Who are these associates? Are they companies under common control with Benjamin Williams? What are the repayment terms and are these obligations subordinated? If these are demand loans, they represent an immediate solvency risk.

Item 3: Trade Debtors Collapse

Trade debtors fell from £783,543 to £123,068 – an 84% reduction. While this could reflect improved collections, the magnitude suggests either a significant contraction in revenue/contract volume or substantial write-offs. The relationship between this decline and the P&L reserve deterioration should be examined.

Item 4: Employee Reduction

Headcount decreased from 19 to 16 employees. Clarification is needed on whether this reflects natural attrition, restructuring, or cost-cutting measures driven by financial pressure.

Item 5: Finance Lease Commitments

Total future finance lease obligations stand at £144,332 (current: £34,166; non-current: £110,166). With significant motor vehicle additions (£81,595) and disposals in the year, the nature and purpose of this fleet investment should be understood in the context of the overall financial deterioration.

Item 6: Concentration of Control

Benjamin Williams holds >75% of shares, >75% of voting rights, and the right to appoint/remove directors. This concentration of control means minority stakeholders and creditors have limited influence over strategic decisions.